BEIJING - The
Yangtze River Delta region, the fastest-growing
area in China, has made progress during the first
quarter of 2005 in the readjustment of its
economic structure and growth rate by checking the
rise of several unhealthy and unstable factors. As
result, energy shortages have been relieved, fast
economic growth slowed, growth of fixed asset
investment slowed, and demand-side consumption is
brisk. Overall, the three main factors developing
the area - investment, consumption and exports -
have been brought into greater alignment.

With the exception of Yangzhou, Zhenjiang
and Taizhou, which posed higher GDP growth
year-on-year, other cities of the 16 cities in the
delta area reported slowdowns in their GDP growth
in the first quarter. Within the delta, the rate
drop of the seven cities in Zhejiang province was
bigger than that of the eight cities in Jiangsu
province. The growth in Shanghai municipality was
10.8% in the first quarter of this year, as
against 13.5% in the same period last year.

Half of the cities in the area maintained
more than 15% GDP growth. Among them, Nantong and
Wuxi cities led others by growing at a 15.5% rate,
0.6 percentage points and 1.9 percentage points
lower, respectively, than the rate in the previous
year. These two cities were closely followed by
Suzhou, Zhoushan, Changzhou, Nanjing, Yangzhou and
Zhenjiang cities, with growth standing at
15-15.4%.

Suzhou City recorded the biggest
drop, some 3.1 percentage points down from the
previous year. Seven cities reported a growth rate
between 12 and 15%. Of these, Hangzhou and Ningbo
recorded growth slowdowns from 15.5% and 15.2% to
13.5% and 12.5%, and Jiaxing and Shaoxing from
16.2% and 15.1% to 14.2% and 13.3%, respectively.
Huzhou moved from 18% to 14%, presenting the
biggest drop among the 16 cities.

Industrial growth has become more
rational. Growth of electric power for industrial
use has slowed down remarkably, while the
excessive reliance on heavy and chemical
industries has improved. Both light and heavy
industries are now driving the economic growth in
the region.

Consumption of electric power
by industry in the Yangtze River Delta area, not
including Shanghai Municipality, was 48.2 billion
kWh in the first quarter of this year, an increase
of 17.8% year-on-year, but still 5.4 percentage
points lower than the growth in the same period
last year, and 10.3 percentage points lower than
the growth of total industrial output value of
large industrial enterprises. Among the 16 cities,
with the exception of Ningbo, Zhoushan, Taizhou
and Yangzhou, which reported increases in the use
of electric power by industry, all cities recorded
slowdowns.

Under the impact of the state's
macroeconomic control measures, fundamental
changes have taken place in the supply of
resources such as land and electric power. The
area saw an across-the-board decline of newly
launched foreign-funded projects, with foreign
investment scale becoming smaller and the growth
in utilization of foreign funds slowing down. The
16 regional cities signed 3,050 contracts on
foreign investment in the first quarter this year,
957 less than the same period last year, with
contractual foreign funds amounting to US$15.62
billion, down 10.8% year-on-year, and actual use
of foreign funds amounting to $6.38 billion, up
6.4%.

Broadly speaking, the roles of
investment, consumption and exports in the area's
economic growth have become more coordinated. The
16 cities showed a slackening in investment, a
stable recovery of consumption, and high exports.

The reliance on investment for economic
growth has weakened, although the export-oriented
economy still plays a large role in the area. In
the first quarter of last year, investment in
two-thirds of the cities in the Yangtze River
Delta area increased more than 50%. Total
investment in fixed assets in the 16 cities
reached 302.6 billion yuan, rising 15.5%
year-on-year, and down 43.6 percentage points from
the same period last year. Among them, seven
cities registered investment growth of more than
20%, and three cities reported negative growth.
Allowing for price rises, most cities posed lower
growth rates in fixed investment than the growth
rate of GDP.

At the same time, by
contrast, consumption in the delta region has
increased steadily. Total retail sales of consumer
goods in the 16 cities reached 238.1 billion yuan
in the 16 cities in the first quarter, jumping
14.6% year-on-year, and 0.7 percentage points
lower than the growth in the same period last
year. The gap between growth of investment and
that of consumption has narrowed, from 45.9
percentage points in the first quarter of last
year to only 0.9 percentage points in the same
period this year.